can continue to pay for all of the inpatient and outpatient services to there's not a financial panel he associated but also provide them with improved guidance so that way when they have a patient who's in the hospital who needs two midnights of hospital care they can safely admit that patient and have to worry about a future denial. >> one of our questioners noted that he was dealing mostly with medicaid and not medicare. this questioner wants to know what other programs do with this bundle of issues was the observation status treated under medicaid and private plans? and i might add under medicare advantage plans where the payment is fixed in advance. anybody? this question frequently comes up to me. and i have expertise on medicare and respond by saying the rules

that we are developing a fly to medicare only, medicaid and private insurers are free to develop their own policies on these kinds of issues. medicare advantage is a little different, and i don't want to get into medicare advantage responsibilities are. but they are medicare plans. so, policies that apply to medicare a apply to them. i don't know the specific context. i do know we have had a number of what we call open-door calls to and from the hospital community and others about the application of the rule as a part of trying to educate all of the people that are affected and we have brought medicare advantage expert into those to help answer those questions. >> just to follow up on that, medpac looked at as a couple years ago about an observation, and because of the increase in observation, which they had found committee also looked at

whether the recovery audit contractors, medicare recovery audit contractors scrutiny seemed to be driving this allowed. and they looked at a broader segment, both medicare and private observation stays. and they found that there was an increase in observation across the board him and not just from the medicare and they surmised that there were private payers also scrutinizing short stays in the same way that medicare was and that that might be driving it. we just note that in the report i think we did look at whether or not i'm the message we lookt medicare beneficiaries both able and disabled we looked at whether the increase in utilization was different for people over 65 and under 65, and admittedly they are all medicare. but if they are under 65, you would think maybe they would be treated differently for some reason.

but we found that the increase in utilization was the same guard was at the age group, which suggested that probably people under 65 were being treated similarly. >> we have come to the end of our time. i apologize to those of you that wrote some very thoughtful questions. we aren't going to be able to get to them. but we have covered a lot of ground. and i have a hunch that we will continue to honor for this situation, i observe i guess i should say. and to make sure that the different interests that we have heard represented and defended here today get an airing that we make sure we get the most rational decision we can possibly make. thanks to our friends at aarp, not just for cosponsoring this briefing with us, but for obviously playing such a big part in the rationality of the conversation. and thank you for some heavy

slogging of content that you've managed to absorb and contain. and ask you to help me thank the panel for going over some really tough ground and really well chosen words. [applause] >> on behalf of aarp, thank you. we had no idea how many people would come to such a meaty conversation. you stayed and we thank you for your participation. ..

>> news this month in u.s. economy added 203,000 jobs last month and the unemployment rate fell to 7%, the lowest since november 2008 and exceeding analyst predictions. the labor department releasing those figures earlier today. reaction from capitol hill, house speaker john boehner issued a statement saying in part today's report includes a positive sign that --

>> unemployment benefits start to run out at the end of your for some americans unless congress oks an extension. yesterday, the democratic steering committee held a meeting about this issue and heard from several people who face the loss of unemployment checks. here's a sample. >> i have worked my entire adult life, having had three jobs my whole career. and had never been unemployed until now. as soon as i lost my job, i immediately began my series of search for employment, and begin navigating the world of online doors, job boards, and diligently networking.

my goal was to place my resume in the hands of everyone i knew. i have spent the majority of my waking hours looking for work. during this time i was able to support myself because i received those vital unemployment insurance benefits. i'm not only was looking for jobs in my field, or only for jobs in the same salary level. i'm smart enough to know that most likely i would be changing careers and taking a paycheck. i applied for everything and anything. eventually, i began applying for entry level call center jobs. jobs that would have resulted in a $30,000 a year pay cut.

or to put this another way, a 42% reduction in my pay. that was monday of this week. in a box on the floor by my desk i have a stack of job application receipts, job descriptions, research, ma and various, various forms of my resume and cover letters. this stack is two feet tall, and i know because i measured it. in addition, my online network connections have literally gone viral. my regular state unemployment benefits ended in early november, and i immediately began receiving federal emergency unemployment compensation.

i wouldn't have been able to pay my mortgage, and i would have been at risk of losing my beloved little house. i was raised by my mother, a single parent. we never owned a home, but we lived in apartments. so i'm especially proud of my home. and i know that my pcs to mother would have been proud -- might be seized mother would have been proud to know she raised me right. i am somebody. i own a home. now in the eighth month of my job search, i'm happy to say that i have secured a job just three days ago. [applause] >> thank you. again come that was monday. and although my new job pays

much, much less than what i was making, it is a good job with a livable wage. and for that i am very grateful. without unemployment insurance and the federal emergency benefits, i would've not been able to sustain myself in my job search. so for me, these programs have done what they are supposed to do. they kept the in my home. i could still buy groceries and pay my bills. my anxiety was kept to a manageable level, and i was able to keep sending out applications and going on interviews. if it had not been fortunate in

finding his job, i would've faced the year-end cutoff of federal emergency unemployment compensation benefits, absent congressional action. for millions, that would be devastating. for me, it could have meant the loss of my beloved home. i am so relieved and grateful that i won't have to face that now, but i know millions of others are at the same risk that i was just two days ago. again, monday. i am here on their behalf. pleading with congress to renew the federal emergency unemployment compensation program for 2014. and please, give the other 1.3 million americans a fighting

chance to become reemployed. i am an emergency unemployment compensation success story. won't you please allow this to be america's story? thank you. [applause] >> the entire meeting of the house democratic steering committee on unemployment benefits can be seen sunday, 1:10 p.m. eastern, on c-span. >> i am a combat veteran. i served in the navy for seven years before i was medically retired. i contracted a terminal lung disease in iraq. i also crushed both of my hands, parts of the hansen had have my hands rebuild. i am 100% disabled. i can no longer work, and i like

expectancy now is down probably less than two years to my husband as my primary caregiver. i don't need anything from the va any longer. my complicated claim to for years to adjudicate. not once in that four-year study of the present one single these of new evidence. the entire claim was submitted fully developed in its entirety before i was even discharged from the navy. i am here not to represent my claim or my issues. my husband and i are here to make sure that this panel and that everyone that will listen to us will understand that cases like my own, and, unfortunately, like mrs. mcnett, are not isolated. i personally have dealt with at this time almost 1000 cases just in the last six months of veterans and their spouses and children who are dealing with

complex claims that are being denied over and over and over again, or being lowballed. >> this weekend on c-span the house veterans affairs subcommittee hearing on dealing with the das backlog and processing disability claims. watch saturday morning at 10 eastern. on c-span2's booktv taking stock of the "grand old party." former gop congressman and current morning show host, joe scarborough. and on c-span3's american history tv, 50 years ago as a nation great for a lost president, lbj steps from vice president into the oval office. sunday at three. >> the house energy and commerce subcommittee on energy and power held a hearing yesterday on the federal energy regulatory commission's role and authority. acting chairman cheryl lafleur is set to testify a long with the commission's three commissioners. this hearing lasted a little over two hours.

>> i would like to call hearing to order this morning. we are going to be evaluating the role of ferc and a changing energy landscape, and i'm delighted that the commissioners at ferc are with us today. we appreciate very much you being here. i certainly initiative would like to congratulate cheryl lafleur who has been appointed the acting director of ferc, and i enjoyed our meeting yesterday, ms. lafleur, and we look forward to working with you on many issues facing our country as we adjust to this changing landscape that we all are very much involved in. i would say that i think that transcending issue that

certainly encompasses everything we're talking about today does relate to the way the changing landscape of energy in america. with this low price natural gas, we see a transformation from coal to natural gas. many states, and this administration particularly, are being very aggressive in trying to increase the amount of electricity produced from renewables as they try to address climate change. and i would say that as we move forward, and i think you ought particularly have to do this, is likely many people in the administration and other groups point to europe as a model for america. and yet, in europe, 20% of electricity is now being produced from renewables. they have an overcapacity of electricity in europe.

and as result they have very low wholesale prices, which is good, but the residential rates and their manufacturing rates are the highest in the world because renewable surcharges. and so what's happening over there is they're trying to make this transition to quickly, in my view, and that's what people are trying to do in america as well. but what's happening over there is that the utilities, the baseload utilities have lost like $800 million in market valuation over the last 15 months or so. and so as you go to renewables and you try to -- you have to place more emphasis on distribution at the local bubbles, there's not enough capital and utility industry there to meet those needs. and so they have a real conflict in europe right now, and

interestingly enough, they have my fault 30 gigawatts of electricity -- plants producing electricity from natural gas in europe because of the high cost of natural gas coming out of russia. and we had our largest export market of coal last year in recent memory, and the europeans took 45% of that. because when germany closed down their nuclear power plants, they realized, and other countries over there, realized they had to use them goal. to this administration talks all the time about all the above policies is in effect in their greenhouse gas going to prohibit even the option of building a new coal fired plant in the future. so if a going to talk about and all of the above policy, and say that is our policy, then that should be the policy -- that should be the policy.

and so we've introduced legislation. we don't expect anybody to build a new coal power plant right now with natural gas prices so low, but in the future like europe, they're discovering it should be an option. and so i look forward to the testimony of the commissioners today to get some of their views on many challenges facing us. and i look forward to your comments, mr. norris. i know you made the comment recently in a smart grid conference in november about you, your personal view is we don't really made -- may be need anymore infrastructure for natural gas and fossil fuels. i maybe wrong but i think he made the comment. and many of us would disagree with that, particularly with the additional fields that we have, the north east talk shows all the time about not having infrastructure to get the gas to where it needs to be. but we all recognize, we have a

lot of challenges and we can't meet those challenges and less we work together to meet them, and we're going to continue to provide an alternative view as this administration, particularly in the area of energy, where we think that there are some serious disagreements and with dire consequences that are possible. so with that at this time i would like to recognize the gentleman from california, mr. mcnerney, for his five minute opening statement. >> let me think that chairman for calling this hearing today, and is a real opportunity for us to all the commissions in front of us don't want to thank you for coming out here today. it's an area i have a lot of passion for and a good background in. as we know, ferc as a broad jurisdiction over the electricity and natural gas markets such as setting electricity and transmission rates, overseeing regional transmission organizations such as the one we have in california. it's now time to make some important decisions about our nation's energy infrastructure,

and ferc will be an essential component of that decision-making process. efforts to increase her noble energy production, growth of natural gas, and the need to ensure a secure grid will all be critical issues. in fact, there's no shortage of issues to discuss, including what defines the public interest with natural gas exports, licensing lng export facilities, licensing natural gas pipelines, smart grid innovation, renewable energy to name only a few. states such as california are implementing aggressive renewable portfolio standards, and there's a need to ensure grid stability. it's becoming increasingly important that we have an energy infrastructure that's capable of meeting these demands. our energy infrastructure needs cyber and physical protection. threats to our grid are real and transitioning smart grid presents both an opportunity and

a threat to grid t secured. the energy policy act of 2005 made significant progress providing ferc with the authority to oversee power of grids and to establish critical infrastructure protection. however, more needs to be done to protect the grid. the energy policy act focused on both power systems which can exclude some transmission local distribution and other grid facilities. i think it's worth exploring ferc's role in the grid, an area of increasing innovation and technical developments. these are areas which we can improve upon such as response to emergency situations and addressing potential improvements to critical grid infrastructure protection initiatives. ferc scored nation with the north american and electric reliability corporation -- awful

bit of a mouthful there -- or nerc, rescanning -- related to cybersecurity remain a high priority for me. lastly we must analyze these challenges in the context of climate change, acer's threat to our nation on several levels that has been acknowledged by scientists as well as leaders at the pentagon. combined these issues will dictate how we are able to manage and respond to rapidly changing energy technology, as well as managing supplies and demand in the market. at this point i would like to yield to my colleague from texas, mr. green. >> thank you, mr. chairman, and thank my ranking member for yielding to me and allowing me to speak. today i witnessed will discuss issues that face our country now and in the future including grade security, gas electric ordination of electricity transmission and infrastructure permitting. it's important to note that texas is the face of a changing energy landscape. in texas we have demand for

energy that is growing exponentially. we have great issues that the economic growth, infrastructure needs for market delivery and power generation. we must courtney kemp balance all these challenges with the resources necessary to overcome them. wind power and natural gas offers texas way to clear all these obstacles. our domestic supplies last to meet not only our challenge but those of her neighbor. those must be addressed correctly. last month we have a hearing on h.r. 331 with the north american energy infrastructure act. at the hearing ferc was concerned about h.r. 3301 with the effect of their duty to comply with section three and section seven of the natural gas act. i think after initial musings we want to emphasize that ferc section three and section seven authority remain in place. in fact, h.r. 3301 provides ferc additional authority by limiting the presidential permit process, creating a regulatory structure within the commission and gives the ability to approve the import or export of natural gas

across national boundaries but i think members of the subcommittee has confidence in ferc's pipeline permeability and h.r. 3301 is an example of that. i look forward to discussing all these issues today and thank her witnesses for being here. and again, thank my ranking member for yielding to me. i yield back the time. >> gentlemen you expected this time the rednecks the chairman of the full committee, mr. upton of michigan for five minutes. >> thank you, mrminutes. >> thank you, mr. chairman. america's energy picture is rapidly changing. regulators have got to keep pace. long held belief in american energy scarcity have given way to a new era of the energy abundance especially with regards to oil and natural gas. many policies and attitudes are still rooted in the outdated assumptions of shortages and rising imports. with the potential to obstruct the opportunities before us. ferc is in the middle of many of those debates. for example, america's new abundance of oil and natural gas

requires new infrastructure to meet demands and keep prices affordable. we've got to build this architecture of abundance quickly, given that america's oil and gas output has been rising every year and is straining the existing infrastructure. in nearly every new project is met with stiff resistance at every step of the process. components are enabled by an archaic federal ross says that could be manipulated to cause years of delays for pipelines, power lines, lng export projects and in some cases can block them out right. while the process at ferc generally works well, there's always room for improvement. canada, australia and most eu nations have deadlines for the their environmental record for agencies to act. why shouldn't the u.s. hold our agencies to a simmer standard? congress has been acted to keep pace with the new energy landscape. the house recently passed h.r. 1900, a bipartisan bill that creates more accountability the natural gas pipeline approval process. will soon be considering other

infrastructure projects as well, including a bill that i have co-authored with my friend gene green to bring more certainty to energy projects across our border with canada or mexico to help create a more robust and self-sufficient north american energy market. american energy holds tremendous potential for millions of jobs and for affordable energy prices from everyone from homeowners to small businesses, certainly the manufactures. the u.s. is always a proud global leader in the safe and responsible development of our resources. the prospect of lng exports not only means jobs to the u.s., but also need to improve relations with allies and trading partners and enhance standing around the globe. none of these benefits can be achieved if in america's energy is choked off by red tape which is precisely what we are examining the ferc posts today. i look forward to working with the acting chair, and all of the commissioners before the committee. i look forward to a constructive and productive dialogue and

process as we move into next year in the years beyond. and i would yield time bashing anyone to our side need time? if not i yield back the balance of my time. >> at this time recognize the gentleman from california, mr. waxman, for five minutes. >> thank you very much, mr. chairman. i would like to thank the commissioners for being here today and i want to congratulate his lafleur on a new role as acting chair. the federal energy regulatory commission has a broad range of important issues before us, both renewable energy integration and electric transmission modernization to hydropower licensing and enforcement actions to prevent energy market and mutilation. but i want to focus on an issue that has not gotten enough attention during this congress, and that's grade security. the nation's critical infrastructure and defense installation simply cannot function without electricity.

yet it is clear that the electric grid is not adequately protected from physical or cyberattacks. these are not theoretical concerns. just this april there was an actual attack on our electricity infrastructure. this was an unprecedented and sophisticated attack on and electric grid substation using military style weapons for the attack. communications were disrupted. the attack inflicted substantial damage. it took weeks to replace damaged parts. under slightly different conditions, there could've been a serious power outage or worse. the fbi and others are investigating this attack. so as not to harm any ongoing investigation, i won't disclose details of the incident, but i have been in touch with the fbi and they're willing to provide the members of this committee with a briefing on the very real threat that attacks like this

pose to our critical infrastructure. and out the chairman will work with me to get that briefing scheduled quickly so that members can get the facts. the april attack is hardly the only threat facing the grid. a few months ago in arkansas there were multiple attacks on power lines and grid infrastructure that led to millions of dollars of damage and brief power outages. independent engineers also recently discovered a new cyber vulnerability in the software used by many electric grid control systems. we rely on an industry organization to develop reliability standards for the electric grid through a protracted, consensus-based process. ferc lacks authority to directly address these threats and on of those. that's incredible. ferc lacks the authority to address these threats.

congress needs to fix this gap in regulatory authority. in 2010, a bipartisan grid act would have provided ferc with the necessary authority. it was a bipartisan consensus that national security requires us to act. that bill was reported out of the energy and commerce committee on a vote of 47 to nothing. and then it passed the full house by voice vote. however the senate did not act on this legislation. mr. chairman, we worked on this issue in a bipartisan way in the past and we should be able to do so again. we need to give ferc the important new authorities like the authority to take action to protect the grid in emergencies. this is a national security issue that deserves our attention. we should act now while there's still time to protect against successful attacks. thank you, mr. chairman for the chance to make the opening

statement. i look forward to testament of the members of the regulatory commission, and an opportunity to engage in question. yield back my time. >> the gentleman -- >> is there any other member on our side? yield back. >> that concludes the opening statement. so at this time i would be recognizing each one of you for your five minute opening statement, and all of you are skilled witnesses and you know that our little lights, red, yellow and green, what they mean. so the only reason i mentioned that is we are expecting some votes on the floor sometime this morning, and i'm hoping that we will have an opportunity to go way down the road before that happens. so, ms. lafleur, you are recognized for five minutes for an opening statement. thank you.

i have appeared before this committee, subcommittee previously in that capacity. today, iap before you as the commission's acting chairman, and deployment i received just 10 days ago. thank you for your good wishes and i look forward to working with my colleagues and wonderful employees at ferc in my new role. thank you for calling this hearing today. my colleagues and i appreciate the opportunity to give the attention you give to your oversight duties and the opportunity to share our work with you. i'm honored to lead the commission at a time when our nation is making substantial changes in the power supply and its associated infrastructure to meet environmental challenges and improve reliability and security. in particular, as you noted, we are seeing significant growth in the use of natural gas for electric generation due to the increased availability and affordability of domestic

natural gas, and to the relative environmental advantages and likes of operating characteristics of gas generation. and that's i think a significant advantage we have over your with the abundance of domestic natural gas to balance our renewable resources. the second driver changed his birth. this tremendous growth of renewable and demand-side resources which are being fostered by development in technology and policy initiatives in 39 states and that the federal level. finally, new environmental regulations are also been shooting to changes in power supply. off of the drivers of power supply changes are largely outside the commission's jurisdiction, we must be aware of and adapt to these developments to carry out our responsibilities to ensure just and reasonable rates him a reliable power grid, and fair and efficient electric and gas markets. my colleagues will discuss several of the ways we are responding. we divided up these topics and i want to focus the balance of my

testimony on another critical aspect of her work, reliability and grid security. ensuring reliability means that the commission and nerd, our electrical reliability organization, really take care of two things. what is the day-to-day nuts and bolts activity like trimming trees and semi-released to keep the lights on, emergency response, and the second is emerging issues like cybersecurity. i believe we're making progress on both fronts. in the past three years we have voted at numerous orders on the day-to-day type standards of treatment, frequency response, planning for criteria and so forth. we hear from your that are seeing a reduction in transitional related outages in the grid as opposed to previous years. going forward we very much have to build on that progress. the emergency issues are somewhat different because we have to try to set standards in environment of incomplete information. we don't have the benefit of decades of experience and we

know challenges are evolving. but it still income with honesty tried to develop meaningful cost effective regulation that we can enforce in an environment of imperfect knowledge. two weeks ago the commission approved version five of the article infrastructure protection standard that covered the bulk electric grid against cybersecurity incidents. they are not perfect. we did ask some question as we approved them, things we wanted modified but they represent substantial step forward from the protections that were in place before. we've also started a rulemaking to require standards to protect against geomagnetic disturbances that can be caused by solar storms and human actions. a real example of high impactful frequency threats to reliability that we need to get ready for before they happen. finally, i want to touch on the subject that congressman waxman raised, the physical security of the aspects that make up the

grid, protecting them from tampering, vandalism and sabotage. in general our approach in this area has been based on cooperative efforts with industry and other government agencies, dhs, fbi, dod and so forth to try to develop best practices and communicate with industry to make sure they're implementing those best practices. thank you very much for the opportunity to be here today and i look forward to your questions on any aspect of the commission's work. thank you. >> thank you, ms. lafleur. and mr. moeller, you are recognized five minutes. >> finca, chairman whitfield, ranking member, members of the committee, thank you for having us back for this valuable oversight role that you undertake for the federal energy regulatory commission. i am phil moeller, sitting commissioner, and your staff asked us to focus on three areas in our testimony today and add additional items that we thought were relevant. so i'll talk about the three

items, hydroelectric citing and add a couple more, gas electric cord nation and some reliability concerns on the electric grid. related to order 1000, i was generally supportive of order 1000 because i felt like it would add to the certainty to build needed an additional affect transmission in this country. and for the most part i think it's helped particularly with the transmission planning process. it's forced a more open and arguably more accountable process. for a couple of areas which i disagreed with majority on the difference was how we deal the right of first refusal projects. this is specific to reliability watches, not those economic projects that reduce congestion caused by the public policy projects to try and provide generally renewables through transmission, i'd rather when the utility is required because of nerc standards to build a project to enhance reliability, i would've preferred that we give a very limited time right

of first refusal to the incumbent utilities because i didn't think the litigation risk was worth it. we are seeing the litigation out on the issue, hopefully that will be resolved soon. the secondary had to do with the cost allocation methods of the rule and the concern that because of the regional cost-sharing element of it, it would force utilities are getting the incentives to you instead of building a regional projects, just go to local projects. i think particularly in the midwest we've seen that happen. for the most part we have several more years of order 1000 compliance ahead of us. we have further iterations of the intraregional filing and we haven't even tackled the interregional filings yet. those of the very complex with some major policy issues. to order 1000 will be with us for a while. related to high deciding and pipeline citing, we have a lot of the same some issues and the new members of the committee have been concerned about the length of time that's taken, but simply put we are dependent on state and federal resource agencies in the process to

deliver their part of the analysis. and if they delay that it would delay our ability to act. i know there's been legislation to consider moving this up. there is more extensive legislative context after in terms of actually giving ferc the ability to decide whether some of these conditions are in the public interest. that we take a major legislative change but if you're interested we could talk about that for the. related to gas electric cord nation, acting chair of the reference this. we been working this now for about 22 months at the commission. we've had a series of seven technical conference the first five original and then we dug down to a series of issues that ferc set on communication, where the people are comfortable talking to each other when there's typically a weather-related supply squeeze. then we talked about timing mismatch of the gas trading day

of the electric trading day. i'm happy to report that as commission we issued a final rule on the communication protocols just last month. i want to thank omb. i don't have it was but they made an effort to make sure that we could have a 30 day turnaround on that rule so it would be effective december 23 before we go into the really tight season -- i.t. den season this year. so they deserve something so that. on the electric reliability we do have an independent issue related the effectiveness of the map will. i just want the committee to be aware of the fact that we are looking at potentially some pretty tight situations in the midwest, footprint of the midcontinent independent system operator. perhaps as early as the summer of 2015 but certainly as soon as the summer of 2016. it's something i think really deserves your attention. i know that the miso is working healthy with the states to try to come up with solutions. we are happy to let them try to

solve it but that times are extended tight. they can tell you more the numbers, but we are looking at some pretty small reserve margins for the footprint and recall that under the miso agreement they all showed a surplus but they also share the deficit. so if there's a regional deficit, the pain will be shared in terms of frankly rolling blackouts if it comes to that. we can hope for a cool summer in the summer of 2016, but that's not necessary a prudent approach. so with that i would be happy to answer any questions at the appropriate time. >> thank you, mr. moeller. our next witness is mr. john norris. you are recognized for five minutes. >> good morning, chairman whitfield, ranking member mcnerney, and members of the subcommittee. thank you calling this thing. and the opportunity to testify. as i acknowledged in a written test with their significant changes occurring on our energy landscape. the operation of our energy system in america has

experienced in my view only modest incremental change over the last many decades. yet in recent years the rapid development of new technologies is bringing much more rapid change to the system. that change can be disruptive. i think embracing these changes will allow a much more efficient utilization of our energy resources. the challenge before us i believe is to enable our system to be more efficient through the utilization of new technologies and foster the development of a diverse set of competitive energy resources, while at the same time we ensure we have reasonable rates for consumers. as a result of the development of fracking technology we are experiencing an abundant supply of natural gas and resulting gas prices at their lowest since 2002. this new supply of gas is changing the economics of electric generation resulting in the retirement of older and less efficient cold units and most recently some nuclear plants. the new generation being built to replace these units primarily

combined gas plants, wind and solar generation. this recent trend appears likely to continue. this change in our generation x is being driven by significant -- by the economics around low price gas and the development of more efficient and productive wind turbines and solar panels. the other drivers are little to no load growth, public policy such as portfolio standards, compliance with the epa rules implementing air standards, and the development of the management technology like energy efficiency and demand response. at the same time change is occurring in our electric generation we are experiencing significant element in technology around grid operations. a large percentage of our existing transmission and just a vision grid is quite old and only modest technology enhances have been made in nearly a century of operation because century is being replaced by a gritty, is commonly referred to as a smart grid that is opening up multiple opportunities for

more efficient utilization of our energy resources and expand the marketplace for electricity to a vast new supply of diverse energy resources. one of ferc's recent focus of any adjustment of market rules and regulations to ensure that all resources including new technologies are able to compete in our energy market under energy system. the continued investment and new technology and jobs and energy production and management of our energy consumption is critical for maintaining a competitive energy economy and efficient utilization of our resources. as our energy system changes, providing stability, market access and fair record for treatment it's good for maintaining continued investment in our energy infrastructure. my testimony covers several recent actions that ferc stake in the reflector efforts to make adjustments around these new technology and we suspect i'll be happy to into any questions you may have about these actions and to help you in your

oversight responsibilities of our agency. thank you very much. >> thank you, mr. north. and our next witness of course is mr. clark. mr. clark, you are now recognized by minutes. >> thank you, mr. chairman, mr. ricci member and members of the committee. my name is tony clark on the newest member of ferc and have had the opportunity speak before in a previous job but this is my first opportunity as a member of ferc so thank you for the invitation to be with you here today. in my opinion, this is in the reference, the biggest star in energy today is the revolution that's taking place in shal shas and shell oil. probably the biggest story in decades. this flood of domestic gas has really upended utility planning model and market fundamental. gas at the sustained prices that we are seeing now today is dramatically impacting where utilities are putting money in the buildout of the grid. as an example in 1990 coal was responsible for about 53% of electricity that was produced

with natural gas producing just 13%. of -- d.i.a. is projecting by 2040, 35% of electricity will come from coal and 30% from natural gas. i would note that predicting these sorts of things is highly speculative. we know there's impending rule makings by the epa, and keeping on how those come out it could have a dramatic impact on how these features play out. such a nationwidnationwid e projection also tends to gloss over the very highly regional nature of our energy and electricity grid. some regions of the country such as the central appalachia, the software much more heavily depend on coal than others such as new england and the northwest and so the implications of the fuel switch has a much different impact depending on where you live. the commission is heavily engaged in the work of assessing these fuel mixed changes in responding to the regional implications of it.

for example, ferc is undergone significant efforts with regard to the implications of gas, electricity independence. as more electricity generated simultaneously turn towards natural gas. as a fuel source. this effort is important nationwide but it's crucial for a region like new england weather number of factors including geography and state level policy choices have created an electricity delivery network that is very dependent on a constrained supply of natural gas. the analysis takes on a different shade in other regions of the country. for example, in my home region of the midwest, coal has traditionally been the primary source of electricity but today the combination of affordable shale gas and impending epa regulations is creating a situation where there are increasing concerns about reserve margins, supply adequacy as commissioner mohler noted, especially as we get into the 2015-26 time frame.

-- 2015-2016 timeframe. castle put a much bigger role in the future. as you might expect that she'll revolution has in both liquid and natural gas production is having a tremendous impact on the work of ferc itself the as the committee is where ferc is brought oversight of both economic and citing relations of the natural gas pipeline industry. the commission has seen a shift in this type of work as industry response to the burgeoning shale plays. shale gas basins have seen significant pipeline investment. shale basin pipeline projects that are either in service or in some part of the permitting process that ferc, total now over 3400 miles of pipe, delivering 31,000 -- over 31,000 in mcf per day with a total investment of over $18 billion. this large amount of natural gas in the u.s. is also creating an impetus for something that was nearly unimaginable 10 or 15 years ago, which is lng export

applications as opposed to import terminals. this is very a significant increase for the commission's workload. presently the ferc has 13 proposed lng export terminals and some face of the permitting process. as you would expect these are major investments and the reviews are quite sensitive. given the influx of natural gas citing work i believe ferc must continually assess our staffing levels and priorities to ensure that we pass in of resources to process these projects in a time and the romantic in addition while the ferc snow cover federal agencies that inform our process i would encourage them to help us by also doing what they can to be timely in their assessment work. mr. chairman, without i will conclude by testament and attention if you think that, of course, be happy to answer any questions you are the committee mayors may have. >> thank you, mr. clarke. and thank all of you for your opening statements. and at this time we like the

opportunity to ask you some questions, and i would like to recognize myself for five minutes to get started. mr. clark, you mentioned the difficulty in trying to forecast the future. and i might add that last year epa projected that less than 10 gigawatts of the nation's coal-fired generation would retire by 2015 as a result of a utility mact. it's not quite 2014, and already announcements have been made to close the gigawatts of coal-fired plants, because of the epa regulations, and low natural gas prices. in the past we've had a lot of discussion about one of your missions on reliability. and there's been a lot of discussion about the epa and whether or not they take that into consideration, and the communication and dialogue between ferc and epa on

reliability issues. do any of you have any concerns? these plants have been announced they are closing 50 gigawatts but that's a lot but they will not be closed for maybe another year or so. but i would like -- we'll start with you, mr. clarke. address the issue briefly, and then i would like to just go down the line. >> the greatest concern is indicated in a couple of times already this morning, it's probably in the midwest, midwest, miso. were projecting by the 2016 timeframe they are likely to have a shortfall summer in a vivid a seventh with a gigawatts of would like to be in terms of reserve capacity. that's a projected number. they are almost certain there's going to be a shortage of the least a little over two gigawatts. so that's the concern in that

region. there are concerns in other regions but probably most acute in the midwest. for my perspective what i would like to see the ferc goes to maintain its independence as an independent regulatory agency, provide whatever information we can through the resources we have to provide information to all of you as well as the rest of the federal government so they can understand the implications of different policy choices that may be made. >> mr. norris, the have a comment? >> certainly, yes. i think mr. clarke -- i share his concerns about miso, particularly and midwest region and could be up to seven gigawatts. could be in 2016 looking at 8.5% reserve margin. so absolute the i'm concerned about that. >> thank you. mr. moeller? >> i remain concerned. i testified before this thing on the same subject. remember that matt takes effect april 16, 2015 people talk a lot about the fourth year but for

only for those plants that are going to retrofit. if you have a marginal plant, it's going to be shut down in roughly about 15 months. and so extremely concerned. mostly the midwest but we even had some issues in september in tdm -- pjm. we'll have to watch very closely and i think we are hoping to epa will be watching it with our help as well. >> ms. lafleur? >> well, thank you very as you can tell this is an issue we've been very engaged in for the past two years. commissioner moeller and i have co-chaired a form with a state regulators at naru on this very issue and the epa has come to everything one of our meetings and discussed some of the issues, how compliance is going, how supply chain issues are going and so forth. i would say over most of the country i think mats comply civil underway, a to does not answer to work is going on right now. there's a question in the

significant issues are in the midwest due to a variety of factors. in addition to rely on the midwest, the midcontinent iso in the states we need to stay closely involved. >> do you feel like epa is listening to you on these issues because i do because in 2011 when they put out their rule, they include a consultative role for ferc if someone needs a fifth year. i believe that includes not just a fifth year for retrofit but also -- and not just for retrofit but also as they need to figure to bring transmission and before the plan can retire. we voted out a policy statement of how we would handle those. we haven't gotten them yet because it's not far enough along in the process. >> they tell us they're listening to us a lot. sometimes we don't think they are. >> i am very grateful that it comes all the meetings and i'vee a commitment from them that they will continue. but it's something that needs close vigilance. >> i was going to ask you about your priorities. i felt like mr. willen cause

agenda at ferc was busily coincide with the energy policy. maybe you'll have an opportunity to tell us later about that. at this time from my time is expected i would like to recognize the gentleman from california for five minutes. >> on one to wonder things i mentioned in my opening stable cybersecurity. i know that's also an issue that's important to mr. waxman. the thing is that smart grid gives us a commence opportunity to gather information so that we can become more reliable so that we can predict the behavior and gives us an opportunity to deliver renewable energies reliably until one. but it gives the utility companies a tremendous amount of efficient about individual users. it opens up utility companies for cyber attacks and so on. this is where you said that choose to be sicko the commission passed, i think you

said, cybersecurity standards. could you talk about that? are those mandatory or are they voluntary? lets you a little bit about the. >> well, thank you very much, mr. congressman. yes, they are mandatory standards. the power system along with the nuclear plants are really the only part of our critical infrastructure right now that have mandatory standards. and what's new about the critical infrastructure standards we adopted to go, or we proposed to approve -- we did in a fun rule of group two weeks ago, i'm sorry, is that for the first time they cover not just the supercritical aspects, but all elements of the bulk power system received some level of protection. because as you indicated with the increasing digitization of the grid, even smaller assets can potentially be a problem. >> the wind of those standards take effect? >> they take effect in general

in two years, but because of the process of getting ready, but there are standards in place now the earlier generation, and the new generation becomes mandatory on top of those standards. but the standards -- that are mandatory standards already in effect. >> mr. norris, you mentioned the old grid technology is being replaced by smart grid. how do you feel that process is progressing of changing the old with the new more secure grid technology? >> i think it's progressing at the pace of great, new technology being developed and in the smart grid panel working to make sure the platform is usable for all those new technology. that's the critical piece right now i think is to make sure that investment in new technologies usable. it provides great opportunity for efficiency and the addition of the status quo i think enable that to be a secure system. >> you mentioned that the ferc is dependent upon local entities

to deliver information on some of the pipeline sightings permits. how would federal legislation established firm timeline? how would that affect the process? with the states be more responsive or would'v would it t handcuff ferc even further? >> is largely federal agencies will. depends on the project of course. resource agencies whether federal, state, sometimes local. i think the key is you can put in statute perhaps timelines. you can change the statute in terms of our responsibilities. .. and whether particularly the local office makes it a priority to deal with these type of projects that we need the input on and we have seen a wide range of responsiveness and lack of

responsiveness throughout at least the federal agencies related to this. >> you don't think the legislation would change that? >> the legislation in terms of timelines i think has positive accountability aspects as i testified before this committee earlier that you don't force a timeline that results in a no because they will say theye don't have enough time to analyze them as a timeline and how they are administered with matter. >> thank you. in the wake of enron and the california energy crisis in early 2000, congress passed the anti-market regulation of authority in 2005. recently, ferc had action against jpmorgan for manipulation to california and the midwest. would you comment on how that turned out, chairwoman? >> that is a very important part

of our work. you gave us additional authority in 2005 and ferc has buried enforcement unit headed up by the former u.s. attorney. we voted on a number of cases either ordering somebody to show cause why they did intimately the market are actually a settlement with them in which they acknowledged the manipulation and jpmorgan is the most prominent. most of them relate to people taking positions into the energy market to benefit from being in the financial market that can cause harm to other people in the energy market. and i think we have to continue to make sure that we are very vigilant that the markets are fair. >> the gentleman's time is expired anhasexpired and recogni and from texas for five minutes. >> thank you mr. chairman. and welcome to the newest ferc chairman. good to have you here. and the other three

commissioners. i interest to all of the opening statements and i was struck at the breadth of regulatory authority that ferc has. it's an agency that almost no one hears about. yet its impact on the u.s. economy and to some extent the world economy is extraordinary. so it's a very important position that people hold. i'm going to focus my questions on the lng siting. of all of the stuff that you have responsibility over there is probably no more important mission that you hold today in terms of the strategic interest in the united states and siting these lng facilities. the congress gave you the authority to make the final decision or at least on the permits back in the energy policy act of 2005 at the time

we did it result you are going to be using that for imports more than exports but the fact is between you and the department of energy, you have the ability to affect the strategic interest all over the world. i met last evening with some officials from the russian energy sector and they are very aware of the impact of the exports from the united states will have a markets that right now the russians dominate just as an example. i also met recently with turkey. some of cuts extend -- does understand -- has expired how the ability to produce the natural gas with hydraulic fracturing and horizontal drilling at the price that we

can do it but our competitive impacts of our ability to affect strategic interest. my first question is under the law, ferc and the doe have joint authority. it's not clear how that authority if at all is coordinated. madam chair, is there any ad hoc protocol with the department of energy on how you review the permit process and how doe interviews the fact that it's in the national interest to do the exports? >> thank you for the question. it's a very important part of the work and we have 13 substantial applications pendi pending. we primarily work in our own

lane which is to review the environment and safety issues in the facilities and they review the actual national interests, national security interests with the export of the commodity so i think our staff communicate so we understand what the mutual statuses are, but we don't actually to my knowledge actually collaborate on the cases. we do our work and they do our work to our knowledge. >> is there any interest at the commission's level with some congressional legislative guidance on how that process should be coordinated if at all? we do the delays in the process although it will welcome the congressional guidance thacongre can do it better.

if there's anything in the bill that will change i guess that is more of another natural gas to changthatwould change some of tt export and i guess i hesitate to comment on anything that is directed at the process because i -- >> my time is about to expired. i'm not trying to be rude at all i promise you that that there is a recent decision that the department of energy rejected at least partially an application by freeport on exporting from their terminal and it was a partial acceptance and partial denial, but they stated that sends the permit request was for one amount of the volume in the natural gas that was less than

what they were asking at the doe that today only approved the volume that was in the application pending for the permit at your agency and a sense these volumes depending on the level of the volume impact the ability to finance the project it seemed pretty troubling, and according to at least my staff reading, the department of energy doesn't have any statutory authority to even consider a proceeding under the natural gas act. can you comment on that? that's why i'm asking about the coordination protocol is any because it's obvious that they based their decision based on the terms of volume approval and partially on what your agency was doing.

>> i think that we are dealing with the application that's before us and be dimensions of what we were asked to approve. without reference to the fact that the application was apparently for different amounts, i would be happy to take it back and dig into it more but i guess the question is why the company put in two different amounts. >> my time is expired. i'm not casting aspersions, just strategically this permitting process is something we need to get right. >> the gentleman's time is expired and this time i recognize the gentleman from california mr. waxman. >> thank you mr. chairman. chair lafluer i know you focused on electric reliability during your tenure on the commission, and i think you are right to make that a priority in the opening statement. i talked about an april attack on an electric grid substation

in california and my understanding is that this was a sophisticated attack using military style weapons and real damage was done and the consequences could have been far worse. you and i discussed this incident when we met yesterday. do you agree this was a serious sophisticated attack on the electric grid? >> absolutely. >> do you share the fbi concerned about publicly discussing details of the attack? >> yes because of the potential for copycat attacks if too much is disclosed. >> without getting into details, has anything like this physical attack on the electric grid ever happened in the united states before? >> i'm not aware of the incident with the same sophistication in all of the elements. it's certainly been sabotage incidents. he referred to the arkansas one

and people cutting down towers and things like that. but this one seemed a little unique to me. >> before you step down as chairman, he is personally briefing officials about this attack. the fbi has agreed to brief members of the committee. would you be willing to have them brief members as well? >> yes. >> chairman lafluer, does ferc have ability to issue standards for physical and cyber attacks? >> i believe to an extent under 215 because there are physical standards for the data centers that are part of the cyber standards, so we have some authority. >> do you have the authority to directly issue standards? >> know it would have to go through the same process that you referred to where we could direct the development of a standard than industry develops and files it.

>> does ferc even have the authority to issue orders to a utility in a grave security emergency? >> though that is one of the things i think the legislation has that has been pending that has given the emergency authority. it's lacking now in the legislation. >> so you think it would be appropriate to address this in the authority? >> yes. >> lewhat we asked each of you agree congress needs to address this gap in the authority? >> my thinking is evil because of the emerging nature of some of the threats it is a good discussion in congress. >> yes, i agree that someone has to be in charge of making the decision if we are under threat. >> thank you. the committee should be working on a bipartisan basis to ensure that it has the authority it needs to protect from physical and cyber attacks and i hope

that we can rebuild a bipartisan consensus behind in 2010 on the need for legislative action. i yield back the balance of my time. >> this time the gentleman from illinois mr. shimkus for five minutes. >> thank you mr. chairman and and all of you for coming. a lot of issues to make a couple statements and i have questions to southern illinois. this is based on your testimony and some of my colleagues shame on us if we have rolling blackouts in the midwest in 2016 because it turns us back to a third world country based upon not balancing our portfolio properly. the point being we are always going to need database load generation. ideally for the nuclear side. i think there's an attack on nuclear power. we know there's an attack on cole. we have renewables coming in but they are not at the levels we

need to maintain adequate supply and that's why does discussions that the chairman and it on the epa and this discussion about reliability we really need your help on this because we cannot go down that route. in fact i think there's got to be a way to start talking about incentivizing major baseload. 800 megawatts to 1600 megawatts facilities to make sure that they are still here because of the pressure that is being placed on them because of natural gas and the epa rules and regulations. it's the reality and we all know that. i also want to follow up with a transmission grid issue. i was trying to get some information but didn't get that done in time. but for the sake of clarity of my constituents in southern illinois and i am just going to

make this a general question and whoever is apt to be able to answer that, that would be fine. there is a huge transmission line project that goes from the missouri border to the indiana border and it comes right across the state of illinois. it's called the illinois river project. one of the major fights has been on the route as you can imagine. and just for the record it's my understanding that the approval is something done with the states specifically the illinois commerce committee and not a ferc matter; is that correct? everyone is shaking their head saying correct. it's going to get a lot of constituents off my back. that's why i'm asking these questions. a second concern has been over the return on equity provisions they will receive for the project. some are questioning 12.83% and want to know why they received that percentage regardless of how the project is conducted.

am i correct to the return of equity is from the transmission owners agreement that was approved by ferc in 2003. we have jurisdiction over the return on equity. >> the return of equity would be applicable to all transmission owners in the region and their projects not unique to the illinois river project; is that correct? >> yes, there is a regional wide return on equity. >> last there was a preceding pending before to reevaluate the return of equity where interested parties were able to submit comments on the 12.3% return on equity rate at ferc. can you tell me where that stands and for reviewing and making a determination on that complaint? >> i'm hesitant to comment on the opendoc it's before us, but i think you have my commitment

and i suspect those of the colleague to give the cases before us a high priority because they are important and there are several pending before us as the reference as are very important to the company said the transition grade. >> the other thing interesting about the transmission grid, the citizens of southern illinois are getting no benefit from this. why? >> is because the renewable portfolio standards and states trying to wield increasing power so that really needs to be part of the consideration to understand as the fights go on therthere's no benefit to the fs in southern illinois. i wanted to also end on this

issue because ideal of democracy in eastern europe and these experts are critical to our allies poland, lithuania who want to stop the extortion by russia and using energy as leverage and power. so i agree with the chairman. this is not just a critical issue for us. this is a critical issue for peace, democracy and our allies and i hope you can keep that in consideration. yield back my time. >> right now the gentleman from texas, mr. green, for five minutes. >> thank you mr. chairman. first of all, if you can't tell by my accent i'm from texas and have a district in houston. i tell people i was born there but i've never lived near a pipeline in the houston area. so, crude oil, natural gas,

liquid coming you name it. so i don't have a big concern about it just part of the way of our life. i have the jurisdiction to do pipeline safety and we passed the good pipeline safety bill in the last congress and i can call you in a few years we are going to find a technology improved and how we can deal with it and hopefully we will pass another reauthorization with additional standards that will make them even safer. commissioner clark and your testimony you stayed approximately 75% of daily consumption is covered by the north american resources. you also state that we are more secure and we have been in decades. what a viable north american energy markets further our security interest? >> congressman, the infrastructure generally helps us for our energy security future. with regard to the 75% figure, that was in reference to the liquid products have about 75%

covered from north american resources. >> in the recent cross-border decision they stated that an export of natural gas would promote national economic policy and stimulate the flow of goods and services. what experience or authority would allow ferc to meet such a declaration? >> the bill that you are referencing is 3300. >> this is just a -- the state of the expert of natural gas would promote national economic policy and simulate the flow of goods and services. i was asking what experience do you have to show that? >> i will get to 3301 in a moment. >> the ability to site infrastructure is clearly critical to the nation's energy security future and to our national interest. >> would you agree the statement and promotion of the strong

national economic policies in the decision-making purview? >> to the degree that it's authorized by statute three to. >> to provide additional authority that ferc has the necessary expertise to coordinate and make sound and reliable decisions relating to u.s. interest? that generally speaking i believe, yes. >> and a side note a number of us went to mexico for another parliamentary the friday before thanksgiving and one of the things that was highlighted by the discussion with the members of the congressional of the recent decision on the pipeline from texas natural gas pipeline in northern mexico because they don't obviously have a lot of resources but not enough production and my concern is that that was no problem at all. we may be selling or providing natural gas to mexico, but 20 or 30 years from now, we may need to be importing it from mexico because the infrastructure we are building up a custom natural gas, downstream chemical, you name it, manufacturing.

so, but that was a big when when we were with our neighbors in mexico. so i appreciate that on the cross-border pipelines, which brings me up to hr 3301. the north american energy and researcher act, ferc blank staff raised concerns regarding confusion over whether legislation would prohibit ferc from fully complying with section three and section seven of the natural gas act. if we were to amend the legislation specifically, to state that nothing in hr 3301 would affect the need to fully comply with the natural gas act to you the leave ferc would no longer have concerns with the legislation and i guess i will ask the doctor. >> i think you've identified the important concern with the legislation. i think with an amendment i've seen in the discussion draft, i think we would be comfortable -- i would be comfortable operating under the new law with respect to natural gas imports and exports created the other parts of the act, electricity and oil

are beyond us. >> other agencies are in the act to be able to deal with those. so i appreciate that. commissioner moeller you state that the efficient c. would be improved and many delays are by a lack of timeliness from other state or federal agencies. could you provide a little more explanation on that? otherwise state agencies don't have a lot of oversight, but other federal agencies, is that delay in ferc from providing the typical 12 month turnaround time? >> yes. we could give you specific examples later if you want them, but it kind of depends and goes back to the point i made earlier. there's a lot of regional differences. if the management regionally makes the priority it happens creative they don't, they can drag their feet. >> before i was all the time, chairwoman lafleur, there's a concern in texas about the reliability issues and a number of outs on the subcommittee has made attempts to resolve an

issue because the department of energy says you can do something with a power plant, but the epa says no, and we are trying to correct that that i know they've passed that 271 on the greater reliability conflict act. i would hope we would deal with that because that would help us at least in texas with some of our reliability issues and nationally. thank you for the courtesy. >> the time is expired. the gentleman from pennsylvania mr. pitts is recognized for five minutes. >> thank you mr. chairman. the concept of the beneficiary page is at the heart of the way our transmission system operates and assigned cost. and i'm concerned under order 1,000, ferc is defining benefits so broadly and spreading the cost so likely that the simple action has no meaning anymore. chairwoman lafleur, please explain the idea of the beneficiary pay, what it would mean and keep in mind i don't

want my constituents paying for subsidized midwest wind with no voice in the processing. i know that you can't address the merits of individual compliance filing but there is a legal point i would like to raise with you that i think stands on it's own t its own toi hope you will be able to respond. it required the regions to plan cooperatively across the region as the region encompassing pennsylvania already does and take into account three kinds of benefits, reliability benefits which can be very hard to quantify but are very real and making the public policy requirements to connect resources at states require them to connect which are normally identified by the states such as pennsylvania which has a renewable portfolio standard and third, congestion benefits to reduce the cost of power by

building more transmission. the order required the region to take the benefits into account in assigning the cost and i think the region of pennsylvania is a part of is a good example of coming up with a hybrid proposal that uses different types of cost allocations together for different types of benefits that i think we've proven preliminarily in the first case. >> you think ferc has authority under the federal power act to allocate cost for the new transmission to entities that don't have a customer or contract will relationship to the builder of the line that don't need the capacity provided by the lion? >> i think that under the court's decisions in our orders, there has to be a proportionality between the benefits and benefits and cost, but not necessarily line by line.

there can be a portfolio of projects in the region that some benefit why are you and some benefit another end of the region agrees to it we assume they've negotiated that they all get something. >> can you show me what section of the federal power act gives lafleur the ability in a contractual relationship? >> yes we are relying on the sections of the act that require just reasonable non- discriminatory rate thinking that a process that where the states involved and the companies involved negotiate the cost will help ensure the just and reasonable transition rates. >> commissioner clark, in specific, ferc ordered 1,000 compliance filing orders. you have raised some serious concerns about the potential downside of the commission's implementation. can you elaborate on these concerns in particular the implications for the consumer's? >> sure. to the degree that order 1,000 congressman deals with the need

for perhaps greater regional planning i'm onboard with that. i think it's prudent for utilities to do so. to the degree that it's about trying to come to more accommodations with regards to the cost, cause or cost pay allocation issues i think that is helpful to read where i have disagreed with the majority of the commission from time to time, is with regards to how ferc has been understanding and allowing the isos and utilities to take into consideration the state and local law that they still have to comply with because we have a federal system where they still have substantial state and local compliance laws. and i've tended to argue that we need to get more latitude for those utilities that we regulate to continue to understand and comply with and give them the flexibility to take into consideration the state and local existing laws and not use order 1,000 as an attempt to sort of shake up the

jurisdictional box but i think just leads to greater litigation. >> under order 1,000 it is predicated on the idea, not the evidentiary area record but insufficient transmission is being built. how does the order solve this problem and how will we know when the proper is being built? well the marketplace tell us or other utilities tell us? mr. clark. >> mr. chairman and congressman, the way i understand it will be and interpretive process so it will take a different shape in different regions. as i understand the grade is highly reachable by nature. in some regions like the midwest you have renewables and in parts of the region you have the renewable portfolio standards and in others you have the regional utilities and states coming together talking about some of those issues and other regions like the southeast, you have a much different situation.

you don't have access to renewables and you have a different regulatory structure in those states. i just believe that ferc has to be open to understanding those regional differences and accommodating those. >> this time we recognize the general man from new york for five minutes. >> thank you mr. chair. commissioner lafleur come in your testimony, you know that improvement between the years 2011 and 2012 and the number of minor weather-related double power system transmission related outages. as you know we have several other related issues that can contribute to the reliability problems. older concession lines integrated equipment needs to be upgraded or replaced at an increased and severe weather event that i have seen in my district and throughout new york that can cause outages. in addition we have much more reliance on the it in general everything from financial

transactions to research and manufacturing, things that require reliable power delivery. how are these changes in the nature of the demand for power come of the aging parts of the grid and increased frequency and intensity of storm related descriptions being considered in ferc blank reliability efforts? >> that is a big question. i guess there's at least two different parts of it. one is the actual reliability standards to meet sure that the transmission asset owners have the accountability for the refurbishment of the lines so that the lines operate properly in order to meet the standards. the second is we were talking about the order 1,000 transmission planning. in reference was made to the transmission rates and that is all a part of making sure the structures are in place so that the companies can invest the money they needed to replace aging infrastructure. and as you know i am familiar

with some of the aging resources in the region. it was an early part of the country to electrify. >> thank you very much. and ferc blank changes to the capacity market rules and both the pjm area and iso- new england that threatens to continue the ability of the load serving entities to solve supply. the own capacity resources to serve their own loads. this problem is particularly acute for the publicly owned and cooperatively owned electric utilities because it endangers their ability to finance new generation units needed to serve their customer base using their traditional business model, which relies on long-term contracts and lower-cost debt. do you anticipate that public power or cooperatively owned utilities in the rt owes with people to successfully exercise the buyer side market power and rto capacity markets? >> this is a question that is directly being looked at in our ongoing capacity marketing

inquiry that is open right now with a heavy participation in public power. but basically, the capacity markets at a forward price of what reliability is worth that is used to have signed with the generators into the existing fossil generators as well as new generators will get paid for being there. and if people are allowed to bid with a subsidized rate that doesn't refer to the market it can pull down the market rate and it could affect everyone's reliability. but there's always the right to prove that the costs are lower and show the iso they can still supply because they can do it cheaply. >> thank you. mr. norris coming your testimony describes the many changes that are somewha single tediously ocg throughout the country in the power production use and delivery landscape. i'm particularly interested about the success of energy efficiency, demand management and renewables are presenting to the traditional economic models fofree goodies. the success of energy efficiency

and demand management is a good story that companies do not increase profits by finding out how to sell less of their major product. so how are we going to provide continued incentives to seek more efficient use and better management of demand if these goals further erode the utilities ability to earn profits? >> well, congressman from a lot of those determinations are made at the state level in the retail rate regulation. what we have been doing that ferc is try to make sure that there is access to the markets for different new technologies that enable the demand response and energy efficiency. certainly, you see it in the pjm markets and the huge increase in the demand response capability and that ability for that to bid into the marketplace and pjm has fostered a demand response in that region. a different region in the country is also looking at ways to develop better demand response resources and more demand response resources. it will be part of a package of solutions that say they are

looking at the potential capacity shortfall in 2016 and beyond. so, what we are doing is to make sure that there is demand response gets treated fairly in the marketplace. so come as a reward for the investors in its technology. >> does it seem like a major restructuring of the power sector overtime? >> restructuring of the power sector overtime. >> i think it's happening right now. you have a lot more people engaged to historically it's been the central station power owned by the utility and give a verdict of the homes and business and now consumers want to be engaged in their own energy production and more engaged in their energy usage. the development of the technologies on the smart grid are enabling them to do that. the traditional utility and power sector having to respond to that change much like what happened in the telecom sector. but it's bringing efficiencies to the utilization. >> i yield back.

>> this now the gentleman from ohio for five minutes. >> thank you mr. chair. and i think the commissioners for being with us today and appreciate your testimony. if i can start with chairwoman lafleur this is a question if i could. under the former chairman, ferc blank first initiative included the smart grid demand response integration of renewables and order 1,000 transmission planning costa locations. do you see that you would be continuing on with the former chairman and blank goals or do you have other goals? do you agree with those, disagree or where do you see a directing the commission? >> well it is a timely question because i'm just in the process of talking to each of my colleagues since it's been about a week that i've been in the job

to really set consensus objectives going forward. but i see that reliability and security will continue to be a top priority. and that includes resource adequacy because you need the resources to be reliable which we've talked a lot about this morning. we have a lot more work to do on transmissions with order 1,000 as i believe the commissioner moeller said it's good to be a big part of our work for a while as well as the transmission rates that were brought up and i think making sure the markets are fair and the work to attract the investment the country needs and that the infrastructure is there and clearly for prioriti priorities. but i think to be refined as we continue forward. but they will do things that are ongoing. >> if i could, just a couple of areas where would you see that like natural gas pipeline permitting? where would that be on the priority list? >> i think i referred to that in

general in the term infrastructure, but i think that in general or project group does a good job handling the pipeline applications in a timely fashion. we are seeing a lot of them especially the compressor stations and we have to continue to handle them. we do about 92% a year and i think we should continue to do so. >> especially on the pipeline it's very important across the midwest especially as you said in ohio we have the utica and one of the things we have is the natural gas that one of the problems we are having is we don't have the ability to get the natural gas where it needs to be. in ohio with the chemical industry at the same time having that gas cracked and being able to utilize it depends on the pipeline so that's very important. also, what about on the organized wholesale electricity markets? where do you see you on that? >> i see that of all the things

we've been talking about today, the power supply changing we have seen a lot of changes in the markets to adapt to the new resources and make sure the resources are there the customers need them. right now we are focusing on the capacity markets and i don't think that that's going to change in terms of the level of cases or the amount of things we need to look at. >> just one last question if i could bear with you, madam chair. what are the best measures to determine whether the restructured wholesale electricity markets operated by regional transmission organizations are benefiting consumers? >> well, that's a big question. i think certainly reliability is the key one. but also, looking at the cost over time. it's very difficult to compare the cost of the restructured markets with the places that didn't restructure because the places that restructured with a high-cost places to begin with and that is why they were

structured i think looking at the cost and reliability are the two big ones. >> and commissioner moeller, does ferc plan to exert jurisdiction over the transmission activities in the non- jurisdictional entities? >> not that i'm aware of. [laughter] >> just want to make sure about that. >> also, with my remaining 40 seconds, mr. commissioner clark, in title vii of dodd frank, congress required that ferc nbc ftc to enter into a memorandum of understanding to establish procedures for resolving jurisdictional conflicts over energy derivatives. what needs to be done in order to resolve the jurisdiction of the conflict between the agencies and provide industry to certainty it needs? >> ferc blank position, congressman, is that both agencies should be able to share on the information we each have so that we can do what we

believe congress has intended us to do. for whatever reason, reasons that predate my term on the commission that hasn't happened. we've had leadership changes in both commissions. and i'm hopeful that they are can be a way that ferc and the cftc and having meetings and strike that and though you -- mou. >> the gentle lady from florida, ms. castor for five minutes. >> thank you mr. tremaine and good morning. i think you all are serving on the federal registry commission at a very exciting time. i mean, this has been a remarkable time. the natural gas revolution that comes at an important time when we have got to -- when we see the natural gas supplanted coal when we know that it's vital to reduce carbon pollution. and then to add on top of that all of the innovations in the smart grid, demand management and renewables.

so, why go al all of this changs occurring, your responsibilities remain very important to insure that consumers are protected and that you are charged with enforcing the law that protect consumers and ensure fair competition in the electric and natural gas markets. you've got to maintain your important relationships with state and regional partners to ensure that necessary energy infrastructure gets constructed. but, what mr. tonko is talking about it's almost outdated. the old utility model of selling as many kilowatt hours as possible instead with what we know about the smart grid and energy efficiency we've got to be able to do some things and some states are doing it to

incentivize at the same time keeping an eye on the infrastructure and reliability. i think what you all have been doing to ensure that renewables can't eat on a level playing field is very important. also that energy efficiency and demand side management are also treated fairly if they compete with traditional power generation. now, ferc is al assaults a day t recognize the demand response can help reduce the electric price, mitigated the market power and enhance reliability. he's issued a recent stuff before and i know that mr. norris was able to comment. can you comment on that recent staff report, the findings and what else ferc is going to be doing to channel this great innovation cost across the country? >> thank you. yes the staff report is something we do under the energy policy act and look at the level of demand response around the country. our primary focus is on the wholesale markets. i think that we have under two

years ago may have made a significant case on how you compensate the demand response in the energy markets. right now there is a lot of issues pending with respect to how you compensate the demand response in the capacity markets and i think we will continue to confront those as a part of our marketing inquiry. i do think though that a lot of the effort on the bundled rates and incentivized substantial isf efficiency is at the state level and i know you're commissioner is going to be the president soon and that's where a lot of the innovation is still coming in the retail markets. >> it seems some states are so far behind -- i would say my state can do a much better job and people are really waking up to the fact that young people now expect to be able to use their smartphone to turn down their thermostats. commissioner norris come you mentioned that you've had conversations with a number of utility ceos about their

electricity generation plans for the future. virtually all ceos you talked to said they were focused on increasing natural gas and renewable energy generation; is that right? >> speeto. >> why are they waking up to the fact it's natural gas and renewables that are the future cracks. >> a combination of natural low-priced gas and an abundant supply. incentives for renewables and meeting the state renewable portfolio standards. but, one of the biggest factors we haven't talked about is the uncertainty. the uncertainty and investment and in the coal-fired generation because as i said in my written testimony, those ceos and people that i've talked to in this industry it's not just whether -- it's when the legislation

will occur or the likelihood that it will occur at some point and it's really purging the financing of the coal generation. >> the science and the economics as well tells us we've got to reduce carbon pollution and the economics are telling us the exact same thing you think about the state of florida where now the tax payers have to invest in are already investing huge sums of money to begin to adapt to a changing climate. think about the huge bill, the bills that come due every time we have an extreme weather events whether it is a drought or super storm. i would think that utility industry also sees the writing on the wall if they are looking for that certainty and the more aggressive we are on moving away from the carbon intensive energy generation, the better. >> the gentle ease time is expired. this time recognize the gentleman from west virginia mr. mckinley for five minutes. >> thank you, mr. chairman.

chairman lafleur perhaps you can give me some direction on this. we have a growing problem in west virginia with the production of the various constituents with ngl that we can't use this as only the local market. it has to be shipped. currently a lot of it is just wasted which is a shame and doesn't benefit to the consumer and doesn't help the environment any. my question is what i'm hearing or sentencing and it's not unique just to west virginia with this exploration of the utica and the marsalis and a number of states. it seems to be a potential jurisdictional problem starting to flare up a little bit and one of them is my question to you is

should we be treating ngls as natural gas and thereby allowing your group to take care of or should we continue having the ngl handled at the state level. do you have a position on that? >> i haven't thought of the jurisdictional question. it's a good thing for the committee to be looking at. there is a lot of stranded gas capacity as well as gas that is being flared because there is not sufficient to take away capacity for the liquids. we'lwe only do the pricing for e liquids pipeline under the interstate commerce act that we don't do the citing. some of the states that i think we could do it well because we do it with gas pipelines but it might not be as popular with some of the states involved.

>> are you going to take and what the states continue to do or are you going to try to assert the role that otherwise is not expected to? >> i didn't have a plan to redefine the natural gas under the natural gas act but i think it is something to think about. >> could you provide us in writing because the timeframe and you said you weren't prepared to discuss that necessarily. could you provide some rationale for the federal government to be involved as compared to the state? >> we will certainly take that and think about it. thanks for the opportunity to think more. >> last is maybe more generic but it's probably for over ten years an engineer in private practice and we were concerned about the electromagnetic pulse. i've been hearing about it for well over a decade but in the

last five or six years people have been talking even more here the last three years they have sent congress. are we waiting for some catastrophic event to happen because there's a lot of talk but no action. >> i think i mentioned in my written testimony and briefly in my verbal testimony that last year the commission voted out a rule requiring utilities to have operational plans and response plan. >> what's your expectation? >> i think the geomagnetic disturbance standards we will get and we have one pending will help somewhat with the electric magnetic poles although i think there is also voluntary efforts going on in the north american transmission for him to talk about other aspects of the emp, but i think the standards are probably the most ten double action that's gone on in this area for a long time. >> is there progress being made

in europe were also -- elsewhere? >> i'm sorry? >> is there progress being made in other countries in dealing with these? >> it's variable. a lot of progress is being made in scandinavia, south africa and the united kingdom. a lot of other countries have taken a wait-and-see approach. israel is also doing a lot. other countries are taking more of a wait and see approach. >> thank you very much. >> the gentle man yields back the balance of his time and recognizes the gentleman from colorado for five tenets. >> thank you mr. chairman and and to the members of the commission for being here today. congratulations to the acting chairman. i just want to follow up on a question, a brief conversation to mr. p8 but we touched on earlier and it was an intriguing question raised. in the colorado i think in just a couple of years ago we had the

hyde park fire became the state's most devastating forest fire followed a week later by the waldo canyon fire which became the states most devastating natural disaster. this year we experienced the black forest fire. do you believe that forest health threatens the greater reliability? >> i recall being involved in that issue because i think that we wrote the forest service or i wrote the forest service after talking to the officials and the democratic state senator that works for the keystone foundation. just very concerned about the amount of debt and its threat from a five-year perspective on the transmission lines with them access to ferc. i come from the state of washington for his health is a big issue up there and particularly with the pine beetle issue. should we hope for two more weeks of really cold weather to

kill those people's? i guess that is the next question, but it would be nice -- it would be nice if the threats to reliability can be removed. >> would love to follow-u folloh you on that and to the acting chairman lafleur we passed the hydropower regulatory efficiency act. this act revised how they operate the conduit projects to require the commission to investigate a licensing process for the non- power to close pump storage projects and also conduct pilot projects. can you give an update on the commissions to implement these and what provisions of the law and what are the other provisions and outline what steps the commission will take in 2014? >> yes, certainly. we have already received a large number of exemption applications for the conduit. and they are all in some stage of the process. a couple of them have already been approved and close to the mark -- some of them are close to approval. >> would you give an idea of the

18 and which ones have been approved and where they are at? >> certainly i can take that as a written question and where they are in the process. also, i believe it was october 22 we held a technical conference on the what we can do to help speed up the process in the two-year licensing requirement. i believe the comments were outstanding right now and the folks in the hydro section are working on that. a lot of the other agencies contributed at the time as wel. we've received few applications for some of the other parts of the law as of yet. you know, the 40-megawatt exemption and so forth. >> do you believe ferc will be able to implement the pilot projects in 2014? >> yes. >> you talked about the workshops and about what you learned. do you believe that we will be able to get through the legislation in the next two years, implementing the

legislation? >> you mean satisfy the legislation? i certainly think that is our job. >> and the process for excluding the small conduit projects from the license, how is that? >> it's working actually very well with your state because of the memorandum of understanding and we recently entered into one with california just a couple of weeks ago. it's variable in different regions because some of the states don't have the resources on hydro to have the same level of cooperation. but it's something we have put a lot of effort and. the team has simplified the website and simplified the process and we process them as quickly as we can. >> do you have a number on the determinations that have been soft? >> no but i can take that. >> fantastic. granted those benighted that would be great if you can

provide some statistics on the length of time the proceedings have taken as well. >> yes. >> to commissioner moeller and commissioner clark. a question for you -- and i'm running out of time. should be -- meter generation be treated as a demand resource or generation resource? >> be timely. i have issues with behind the meter generation because it's not dispatch double like other forms and i will point you to a dissent that i wrote earlier this week on a particular order. >> and commissioner clark, i believe i'm going to have to follow up on the river with some of these other questions and some ferc 1,000 order questions. >> congressman, to a greater degree i think it depends on the record of each of the individual cases. i would have a concern in some areas and others if the measurement verification can be proven. i believe they may be able to participate. there is a separate question with regard to compensation that should be given to those

resources and from time to time i have disagreed with parts of the commission's orders on that issue. >> thank you mr. chairman i will follow-up. >> this time the gentleman from virginia mr. griffith for five minutes. >> thank you mr. chairman. appreciate that. mr. norris earlier you were speaking with ms. castor and you started talking about the people were worried about and building the coal-fired power plants to cause of legislation. could you expand on that for me? >> i think there is a general concern that there will be at some point in time a cost put on carbon. because of the uncertainty of when that will happen and what that will be, combined with the other factors in place right now that i talked a bit in my testimony -- natural gas prices coming epa rules, states require meds -- but it is just to risky

for the investment into the coal-fired generation and nuclear is suffering the same problem on the cost aspect. >> while natural gas is a concern because the prices are lower right now, looking forward, natural gas and coal have completed over the decades and that would probably continue. but with already existing duly proposed epa regulations and the fear that either legislation or additional epa regulations are major causes as to why no one is really looking at building a new coal-fired power plants; is that correct? is that a fair statement of what you said? >> i think some of the existing facilities are being retired because the -- the primary concern expressed to me is the anticipation at some point there will be a cost on carbon and that makes the economics difficult to finance.

>> and then let me ask about anyone who wishes to answer or all of you, pjm and the other markets -- have you done any studies to determine whether or not those markets have actually lowered the cost of electricity coming to the consumer? >> yes, we get regular reports from the markets and market monitors. the years are running together but in the recent past, we compiled a major set of metrics from the different rto's. there were i know within pjm and the other eastern markets cost reductions. they are in part driven by the cost reductions in gas being used to generate electricity. but we also looked at the transition congestion and how that was coming down. so we could provide an update on that in written form as well. >> that would be great.

i appreciate that. have any of you have contact regarding the president's climate action plan? >> not me. >> no. >> i don't believe so. no. >> will listen that interesting. so, they didn't talk to you all about that? i guess they didn't talk to you about it. nothing else you can say about it i suppose. >> in my view we function as an independent agency. they don't give us policy guidance at least never in my experience. they did call to make the acting chairman which i very much appreciate but didn't say anything about how to vote on anything. >> and i wasn't really asking whether they had called the 100 vote on things but i'm curious they came out with a major plan and they didn't discuss it with you. good advice or seeking input or anything like that so you didn't have those conversations either. so maybe i wasn't clear when i asked you the first time around.

.. but their efforts are more around transmission storage and other areas. it came from other parts of the administration. >> so it would be fair to say they didn't seek any information on how this might affect electric prices for the average american family? >> the white house didn't seek any information for me -- from me. >> they didn't know they exist existed. >> i don't have y well, i don't have any additional questions. thank you for being here today. mr. chairman, without i yield back. >> the gentleman from i